HSBC Holdings PLC should have made deeper checks before buying a Swiss private bank that allegedly allowed customers to dodge taxes and a Mexican business that breached anti-money laundering rules, its former chairman said.
“With the benefit of hindsight, it would have been better to have drilled into the detail much earlier. We didn’t get everything right,” Stephen Green told British lawmakers on Tuesday.
These scandals have damaged the image of Europe’s biggest bank and the reputation of Green, who served as the bank’s chief executive between 2003 and 2006, and as its chairman between 2006 and 2010. Green and HSBC had managed to come through the 2007-2009 financial crisis relatively untainted.
“We had that reputation sullied by things we didn’t get right in a couple of different places,” Green told the House of Lords Economic Affairs Committee, which was conducting a one-off session on banking culture.
In 2012, HSBC had to pay a record US$1.9 billion fine after US authorities said it had become the preferred financial institution for drug traffickers and money launderers between 2006 and 2010.
“I’m not going to say we covered ourselves in glory because it’s not true... Since then, they have very substantially reinforced the compliance function and it’s clear we needed to do that,” Green said.
HSBC’s Swiss business has been in the spotlight ever since a former information technology employee Herve Falciani fled Geneva in 2008 with files that were alleged to show evidence of tax evasion by its clients. The bank has admitted past failings in compliance and control at its Swiss bank following the allegations.
Green was also asked how he felt about the high levels of pay in the banking industry.
“It certainly kept me awake. [There was] no possible way on moral grounds of justifying it,” he told the committee.
HSBC chief executive Stuart Gulliver is among the highest paid bankers in Europe, with a pay packet last year amounting to ￡7.6 billion (US$11.84 billion).
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